ARCHIVE: PRESIDENT’S MESSAGE

Innovation Helps Companies Thrive in Today’s Economy

Anne Golden, President and CEO
The Conference Board of Canada

April 4, 2011

Each year, The Conference Board of Canada issues its How Canada Performs report card on how well the country meets its fundamental goal of creating a high and sustainable quality of life. Canada’s “D” grade on Innovation in the 2009–10 edition—ranking us 14th of 17 countries measured—is unambiguous. We can, and must, do better.

In high-wage economies, higher productivity is not possible without innovation. We know that Canada does pretty well at creating knowledge and sharing it. Where we lag is in making money from our inventions and in putting new ideas to work in our businesses.

For many years, business leaders could cite a vast range of excuses for holding back on investment in innovation. Taxes were too high. Regulations were too strict. And with a cheap dollar, there was less motivation to innovate to make money.

Those excuses for inaction have been disappearing one after another. The stronger dollar has squeezed export profits. Corporate taxes have been falling for a decade.

In high-wage economies, higher productivity is not possible without innovation.

The latest data—including the Conference Board’s Canadian Outlook—Spring 2011—suggest that we may be seeing the beginnings of a turnaround. Investment by Canadian firms in machinery and equipment has risen sharply since 2010, as have imports of technology, but progress is very uneven.

National Bank Financial reported in December that the labour productivity of Canadian factories, which export about half of what they produce, has been growing at an annualized rate of 6.4 per cent since the onset of the recession and jumped by an astonishing 4.2 per cent in the third quarter of 2010. But the rest of the private sector is not keeping pace, with productivity for the business sector as a whole up just 0.4 per cent in the latest quarter.

Innovative use of cutting-edge technologies and new processes can and should lead to higher productivity in every sector. So how do we turn around the longer term trend?

First, we have to remember that innovation can take many forms. It can involve dramatic change through new products, new processes, and new markets. Or, as two-thirds of Canada’s innovations do, it can flow from incremental efforts to reduce waste, find greater efficiencies, and respond to changing market demands.

It is time for businesses to step up to the plate.

Public policy has already addressed some of the obvious barriers to innovation. However, we are struggling to find consensus on which other ingredients ought to be part of a Canadian recipe for forging an innovative and fast-growing economy.

But it is time for businesses to step up to the plate. If business leaders still feel they cannot justify the investment needed to drive greater innovation in Canadian enterprises, they need to be clear on what is standing in the way and what policy changes would make the difference. This is the thinking behind the Conference Board’s decision to create the Centre for Business Innovation (CBI). A five-year initiative, the CBI has a mission to learn why Canada is not a leader in business innovation, to generate evidence and track our performance, to develop business strategies for firms and capital markets, and to propose public policies that will stimulate business innovation, which is essential to Canada’s competitiveness.